The US Court of Appeals for the Eleventh Circuit recently upheld convictions for defendants who engaged in an illegal pump-and-dump stock manipulation scheme. Defendants, who participated with seven others in a conspiracy to defraud the investing public through a pump-and-dump scheme of shares of CO2 Tech Ltd. stock, issued false and misleading press releases and other promotional materials and coordinated the activities of CO2 Tech stock sellers and buyers. The scheme left unsuspecting investors with worthless shares of CO2 Tech stock. Defendants were charged with conspiracy to commit securities fraud, wire fraud and mail fraud. They were found guilty on all counts after a jury trial.

Defendants appealed on numerous grounds, including on the ground that the US District Court for the Southern District of Florida erred in admitting evidence in violation of the Federal Rules of Evidence. The Eleventh Circuit found that, while there may have been a question about whether the district court abused its discretion in admitting such evidence, any error was harmless as the record provided “overwhelming evidence of defendants’ fraud.” Therefore, the court affirmed the defendants’ convictions and sentences.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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